In tech, for example, the largest IPO of the year — that of the
messaging app Line —
raised $1.14 billion in July, though much of that came from
investors in Tokyo.

But there's an important reason that could all change: takeovers.

A recent wave of takeovers has left tech investors flush, as
earlier investments are bought out. According to Bloomberg data,
there has been about $57 billion in takeovers in the US tech
space in the past three months alone. Those deals haven't closed
yet, but investors know they're getting that cash (and many may
have sold out by now anyway).

IPO bankers are betting this translates into demand for new
stocks from the very investors who just cashed out with a sale.

"As long as the M&A market stays like this, I'm not worried
about $5-, $20-billion-market-cap-type companies going public
next year," one banker told Business Insider. "There's still
plenty of cash left to put to work."

Another offered a hypothetical illustration to show how a single
takeover could fund multiple IPOs: If a software-as-a-service
company gets bought for $2 billion, for example, and has a public
float of 75%, that means about $1.5 billion of investor money is
freed up to be reinvested (before taxes).

Most IPOs are closer to $100 million in size than $1 billion, so
that sale alone could give funds enough dry powder to buy into
many new deals.

Right now, with so few IPOs available, investors are turning to
existing software companies like IBM, which is up 23% over the
past six months.

While it's typical to see more tech mergers and acquisitions than
IPOs each year, the difference has been sharper than usual in
2016.